Is Bitcoin’s Black Tuesday Just Another Reason to Buy?

As briefly-anointed billionaires Cameron and Tyler Winklevosscan attest, 2017 was a banner year for bitcoin. The flagship cryptocurrency was valued at around $1,000 last January; by the end of the year, it had skyrocketed to more than $20,000, bringing other major cryptocurrencies like ethereum and Ripple along with it. As financial bubbles go, only the infamous Dutch tulip craze of the 1630s comes close. Yet after months of gains, the hyper-volatile cryptocurrency market took a major tumble on Tuesday, dropping to its lowest level since early December (bitcoin fell to less than $10,000, by one estimate) and erasing months of added value in just a few hours. (As of Wednesday morning, bitcoin had recovered slightly, once again hovering at around $10,000, leaving the Winklevii about $443 million poorer, each.)

The proximate cause for the crash was news that certain countries will begin to tighten regulation around cryptocurrencies. Pan Gongsheng, a senior Chinese central banker, reportedly wrote in an internal memo last week that China “should ban centralized trading of virtual currencies as well as individuals and businesses that provide related services.” South Korea, which is among crypto’s largest markets, is expected to decide whether to propose a bill to ban cryptocurrency exchanges; the country’s finance minister, Kim Dong-yeon, said in a radio interview that a total shutdown of cryptocurrency exchanges is still possible. In the United States, BitConnect announced that it would be closing its exchange and lending operation after receiving cease-and-desist letters from securities officials in Texas and North Carolina.

There’s some irony in the fact that cryptocurrencies—decentralized, digital stores of value—would lose value after being targeted by the very governments they are meant to circumvent. Currencies like bitcoin, after all, were designed to be anonymous and stateless. Instead of being regulated by a central bank, new bitcoins can be created by anyone running the software to “mine” them—a computational process which also serves to update and maintain the complex public ledger underlying all bitcoin transactions. For those who believe, as the most fervent crypto fanatics do, that digital currencies will ultimately replace traditional money altogether, a government crackdown only proves their fundamental value.

It’s too soon to tell whether this week’s crash will undermine that thesis. Over the last several months, huge numbers of speculators have piled into the crypto market, driving up the price. On its face, the recent sell-off suggests that investors see real geopolitical risk in moves by China, South Korea, the U.S., and other countries that have raised concerns about digital currencies. At the same time, the crypto market is remarkably concentrated, with about 95 percent of bitcoin controlled by just 4 percent of investors (about 94 percent of whom are men). That can make for spectacular volatility—or, counterintuitively, unusual stability. The bulk of crypto wealth appears to be held by its truest believers, as The New York Times’ Nellie Bowles documented in a recent profile of Silicon Valley’s cult-like bitcoin and ethereum enthusiasts. And they’re in it for the long haul:

This is one of the core beliefs in this community: HODL, “hold” typed very fast, as if in a panic. HODL even if you feel FUD—fear, uncertainty, and doubt. If you show wealth, it means you don’t really believe in the cryptocurrency revolution, a full remake of the financial system, governments, and our world order that will send the price of ether up astronomically.

As one bitcoin millionaire explained, you “HODL when everyone has FUD.” Anything less is a betrayal of what has become, for many, something like a religion. For millennia, people put their collective faith in gold as a timeless store of value—a hedge against the rise and fall of banks and empires. Why shouldn’t they do the same with bitcoin, which has the added benefits of being invisible, weightless, encrypted, and transferrable across any distance in the blink of an eye?

To critics, the setbacks are obvious. With multiple competing digital currencies, there is no agreed-upon standard. There are critical disagreements within the developer community over how to process transactions and how cryptocurrencies should be used. Valuations fluctuate so wildly that there is no sense in ever spending them—a bitcoin could become worthless or double in value tomorrow. Still, the underlying blockchain technology remains a promising way to transform digital transactions. “Every asset we have, whether our cars, houses, or intellectual property—ideas, software, artwork—all of this can be registered, tracked, and transferred on the blockchain,” Melanie Swan, the author of Blockchain: Blueprint for a New Economy,toldFortune. Establishment financial services companies like Goldman Sachs and JPMorgan Chase are already investing in the technology. And a major correction in the crypto market may be a prerequisite for broader adoption. Without some sort of stabilization, there can be no long-term utility for digital currency. A sell-off, in other words, may just be another reason to buy. If you follow the logic of the bitcoin universe, almost everything is.